Whalesbook
Corporate Philanthropy at a Crossroads
This change marks a critical point for corporate giving in India. While total CSR spending has risen sharply to nearly ₹35,000 crore annually by FY 2023-24, the focus is shifting to how and where these funds are used, questioning their real effectiveness and societal contribution beyond simple compliance.
Giving Goes In-House
Since the mandatory 2% CSR spending rule began in April 2014, companies have fundamentally changed how they give. Worried about accountability and mixed results from outside non-governmental organizations (NGOs), corporations are increasingly setting up and using their own trusts and foundations. This internal route now accounts for about 70% of CSR spending by large companies. Over the last decade, thousands of these corporate foundations have been created, forming a self-contained system for giving. While this simplifies oversight for companies, it raises questions about whether the goal of broad societal benefit is being met.
NGO Hurdles and Donor Drought
This internal shift is made worse by a growing maze of rules for independent NGOs. At the same time, individual donors face a major financial disincentive. India's new tax system, the default for taxpayers since FY 2023-24, removed deductions under Section 80G for charitable gifts. Reports show 80G claims have dropped by 35% as of FY 2023-24. While this tax change simplifies things, it weakens individual giving, which is vital for many smaller organizations. This creates an uneven playing field where big corporations manage their own funds, while smaller groups struggle with more rules and fewer donor incentives.
Power Concentrates, Grassroots Struggle
This mix of companies managing their own funds and fewer donor incentives leads to CSR power becoming concentrated in corporate hands. Grassroots NGOs, often working in remote areas, find it harder to get money as companies increasingly direct it themselves. The focus seems to be shifting from varied local projects to standard, reportable results managed by corporations. This change risks sidelining the organizations best suited to meet specific local needs, turning CSR from a way to widely share resources into a system for controlled corporate impact reporting.
Risk of Mission Drift and Reporting Focus
Despite its large scale, the current CSR system carries significant risks. Channeling funds internally can raise costs and lead to a focus on reporting over proven, long-term results. When one company controls the money, the project, and its own public image, accountability is weak. This 'reclassification' of funds might meet legal requirements but can weaken the original goals. It could lead to CSR activities serving corporate branding and risk control more than actual societal improvement. Unlike countries emphasizing mandatory disclosure or due diligence, India's mandatory giving, combined with reduced individual giving incentives, creates an environment where inefficiencies can thrive. The system may encourage spending just to meet rules, not to create real impact, leaving vital grassroots needs unmet even with large reported investments.
Reviving CSR's True Purpose
To restore India's CSR mandate to its original goals, adjustments are needed. Policy changes could require a larger share of CSR funds to go through independent, third-party NGOs, promoting real transparency about results, not just spending. Restoring the financial attractiveness of individual giving, perhaps via a revised Section 80G or other tax incentives, is key. Additionally, applying regulatory checks fairly to all organizations, making compliance easier for grassroots NGOs, and clearly separating social impact from corporate image management are important steps. True inclusive growth requires widespread participation, not just corporate outsourcing. The system needs to evolve so money leads to real impact, not just well-produced reports.